In situations where messages are exchanged via a communications network, the speed at which those messages are delivered can be critical to their success.
For example, the speed at which transaction messages can be enacted in financial trading systems, particularly in high-frequency trading (HFT), is essential for ensuring that a profitable trade can be made, as will now be described below.
Trading venues exist to match the buy and sell orders of market participants in financial instruments (e.g. equities, bonds). Orders are submitted to an order-book. When a buy/sell order is submitted at an equal or higher/lower price than an outstanding (resting) sell/buy order, matching occurs and a trade is executed. An incoming order that will cause a trade to be executed is known as an aggressing order. Orders that cannot be matched immediately upon submission are left in the order book as resting orders and may be matched against future orders. Order books in liquid instruments are most commonly governed by price/time priority: buy/sell orders at higher/lower prices take priority and (when orders are at the same price) orders submitted earlier take priority. The administration of these processes at electronic trading venues is governed by a matching engine.
Investors commonly match their orders against a set of market participants who do not have a desire for an ongoing position (long or short) in the instrument, but who take the opposing position temporarily and seek to profit from the bid/ask spread; these participants are commonly referred to as market-makers.
If a market maker is willing to trade at a certain price level (all other things being equal), they have two options: submit a resting order to the order-book and wait to be matched, or wait for the opposing side to be entered and then aggress it.
The former gives the advantage of time-priority and may encourage an investor to enter an aggressing order as they can be confident of execution, but it carries the risk of being subject to latency arbitrage, also known as being ‘picked off’ or doing an ‘unwanted trade’, when another event causes the fair value of the instrument to change (e.g. price-sensitive news or a change in the price of a related instrument). This occurs when the participant is unable to process the event and submit their order amendment or cancellation as fast as another participant is able to process the event and submit an aggressing order. The time that a participant takes to respond to such events is known as latency.
Market-makers are therefore regularly picked-off by other high speed participants. To limit the cost and frequency of such pick-offs, the market makers therefore quote smaller and wider, reducing the displayed liquidity.
Based on the above-described system and method, the following problems are commonly-encountered in HFT systems:                1. Technological Arms Race: Those traders who make the most profit tend to be those with the fastest technology rather than necessarily being those with the best pricing algorithms. This slows price discovery and adds to instability in pricing. All market-makers are therefore forced to spend heavily on technology in order to keep up with each other. Some examples of techniques which are applied to reduce the latency of processing include the use of high performance networks/switches, overclocked machines, kernel bypass of network traffic, implementing all or part of the critical response path in FPGA hardware, and any associated tuning and optimization of the operating systems.        2. Barriers to Connection: Connecting to a new trading venue requires any latency-sensitive participant to build an optimised proprietary market link, rent co-located space and install optimised computers. These costs represent a barrier to entry for venues that wish to challenge incumbents as they require displayed liquidity from market makers in order to attract order flow from investors, however market-makers are unwilling to commit themselves to paying these connection costs without certainty that there will be sufficient order flow on the platform to recoup their costs.        
It is therefore an object of the present invention to provide a system and method for addressing latency related issues in a multi-user computer network involving the exchange of time sensitive messages between users and a controlling computer device (e.g. a gateway).
It is against this background, and to overcome at least some of the above problems, that the present invention has been devised.